Abstract:
Tanzania as an open economy engages herself in international trade which constitutes
significantly a proportion of the country’s aggregate output. As in other developing
countries, Tanzania regards trade as the main instrument for the development and
growth of the country. Different empirical studies explain the existing relationship
between international trade and the country’s economic growth. However, the
empirical findings produce mixed findings which then developed more curiosity to
conduct this study.
Under this review, the researcher examines the impact of international trade on the
economic growth of Tanzania, whereby goods exports, service exports, goods imports,
and service imports make the independent variables. Otherwise, interest rate and
inflation rate are the control variables while GDP makes the dependent variable. The
study employs a time-series data-set for 31 years (1988 to 2018) gathered from the
World Bank data site. Besides, Ordinary Least Squares (OLS) method is used to
estimate a multiple linear regressions model, and the findings suggest that goods
exports and service exports have a positive and significant impact on the economic
growth of Tanzania; goods imports, service imports and exchange rate have a negative
but significant impact on the economic growth while the inflation rate has a negative
but insignificant impact on the economic growth.
These findings correspond to the economic theories of international trade both
classical and neoclassical theories which regard foreign trade as a catalyst for
economic growth. However, foreign trade has both negative and positive impact on
the growth of the economy. This study concludes that international trade plays a
substantial role in the economic growth of Tanzania. Therefore the study recommends
that the government of Tanzania should effectively enhance export promotion policies,
import substitution strategy of industrialization, and strengthen investment in science
and technology to increase Tanzania’s competitive edge in the international market.
